DoubleClick tumbles on warning, downgrade

January 2, 20024:43 PM PST

DoubleClick fell 9 percent as analysts came down hard on the stock. Though the company beat estimates last week, its 2001 outlook is much worse than had been expected.

Shares in the online advertiser were down $1.05 to $10.96 Monday. DoubleClick provides targeted ad serving for more than 1,500 Web sites using its proprietary technology, which it also licenses to customers.

Last Thursday, the company posted a smaller-than-expected loss in its first quarter but warned that it would post a wider-than-expected loss in its second quarter and in fiscal 2001. The revised guidance was based upon the weakness in the company's media business and the beginning of a slowdown in its technology business.

Analysts said that though DoubleClick's first quarter was in line with expectations, its outlook is much worse than expected. The company now estimates 2001 revenue to be $425 million to $450 million and projects a loss of 18 cents to 22 cents per share. Both numbers have been radically revised from original estimates for revenue of around $501 million and earnings of 10 cents a share. Management also said it now expects its technology business to slow in 2001.

"The deterioration in tech was particularly concerning, as this is DoubleClick's most important asset," said Merrill Lynch analyst Henry Blodget, who downgraded the stock to "neutral" from "accumulate."

"The real value in DoubleClick's business is its unique combination of technology and data. While our central opinion is unchanged, we are discounting DoubleClick's ability to secure competitive wins in the near-term," as a result of the slowing in its technology business, Mehta wrote.

The analyst maintained an "outperform" rating on DoubleClick but said it was "waiting for competitors to hit landmines."

"As long as their competitors maintain reasonable cash positions, DoubleClick's market share is not likely to rise among the top 50 sites," Mehta said.

Morgan Stanley analyst Michael J. Russell also maintained an "outperform" rating, but was more optimistic about the stock. He said the company could beat its own revised revenue numbers.

"We think that this range may be too low. We are forecasting revenues of $453 million for 2001," Russell said. "But we admit we are not terribly confident," due to the overall environment, he added. "The belief in a second-quarter or a second-half turnaround is over--must wait till ༾."

Russell said the company should be able to stay above $6 per share, since it has that much in net cash.

Blodget maintained a "long-term buy" rating because, he said, "business is viable long-term, and the company has significant cash reserves."

He believes its cash reserves and a profitable data business "should provide a floor for the stock at $8" per share.